Oil poised for weekly loss amid weaker demand outlook
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By Jessica Summers on 8/11/2017
NEW YORK (Bloomberg) — Oil slipped, heading for the biggest weekly loss in a month, as the outlook for demand dimmed amid an already shaky market.
Futures dropped 0.8% in New York Friday, poised for a weekly decline of 2.8%. The International Energy Agency reduced demand estimates for OPEC crude this year and in 2018, and said there are doubts about the group’s commitment to cutting production, according to its monthly report released Friday. Even a pledge by Saudi Arabia and Iraq to strengthen their commitment to the curbs and maintain balance in world crude markets isn’t helping to prop up prices.
“With the latest rhetoric from the IEA, it looks like the balancing cycle is further protracted, which is not great for the market,” Michael Loewen, a strategist at Scotiabank in Toronto, said by telephone. Investors need to see either OPEC production really decline or compliance to the output-reduction deal improve to believe rebalancing is happening, he said.
Oil just hasn’t been able to stick to the $50/bbl-level in New York even though U.S. crude inventories are at the lowest levels since October, in part because recent declines are seen as seasonal. OPEC’s rate of compliance with output cuts slid to 75% in July, the lowest since the accord started in January, the IEA said. OPEC said Thursday its output is increasing on supplies from Libya, which is exempt from the deal.
West Texas Intermediate for September delivery fell 38 cents to $48.21/bbl at 9:54 a.m. on the New York Mercantile Exchange. Total volume traded was about 18% above the 100-day average.
Brent for October settlement dropped 38 cents to $51.52/bbl on the London-based ICE Futures Europe exchange. The global benchmark traded at a premium of $3.17 to October WTI.
The IEA Friday lowered projections for the amount of crude required from OPEC this year and next by about 400,000 bpd. About 32.6 MMbpd will be needed from the group this year, less than the 32.84 million it pumped in July.
“Concerns about the persisting supply glut resurfaced after petro-nations reported growing oil output,” said Norbert Ruecker, head of commodities research at Julius Baer Group Ltd. in Zurich. “We maintain a neutral view and see oil prices trading sideways as growing shale output and stagnant western-world oil demand undermine the Middle East’s supply deal.”